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The Business of Christmas

Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

In this festive episode of Global Infusions, Tom and Tom discuss the business of Christmas, from the dominance of one pudding maker to the commercialisation of advent calendars. They also see if an AI chatbot can write a decent Christmas movie, explore the economics of gifting, and reflect on the production of the last ever Boeing 747.

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TR - Hello, I’m Tom Record and I’m here with Tom Morris. Welcome to Global Infusions, an investment podcast from the Liontrust Global Fundamental team that takes a long term view of today's stories.


Last episode we chatted about music and the industry that has been built around it and how it is evolving. This episode we’re taking a seasonal tour to discuss Christmas – and in particular how it is big business. If your taste buds are tickled or you have any questions for our next episode, please do send them in via your client contact or through the contact us link on the Liontrust website.


So sit back, grab a cup of tea and remember that when we talk about individual companies we are not making a recommendation to buy or sell shares and that some of these companies may not be held across Liontrust’s global fund range.


TR – So Tom, where shall we start?


TM – Well let’s start in July, which is when the supermarkets hold their big Christmas press events. I went along to the Tesco one in 2018 and it was a lot of fun, albeit pretty weird to be walking through a series of sets made to look like Christmas scenes inside the Oxo tower in the summer.

TR – Ha! And I presume this is because all the Christmas magazine and newspaper features are planned in July?

TM – Exactly. But obviously the planning for that event starts much earlier, in many cases during the previous year, when teams of product developers and buyers will be working with suppliers to invent new canapes, or new ways of presenting turkey and goose. A big theme every year is making things easier for customers – so dishes where more of the preparation is already complete.

TR – So complex centrepieces of meat and vegetables that you can basically just take out of a box and heat up?

TM – Exactly, which I must admit is what I go for every year. Now Tom, while we’re on Christmas food, did you know that about 95% of all the Christmas puddings bought in the UK are made by the same company, in the same factory?

TR – What! No I did not know that! Sounds like a major key-factory risk for Christmas!

TM – Well it’s true – whether you’re buying from a discounter, a supermarket, or even Harrods, they’re pretty much all made by a company called Matthew Walker in Derbyshire, the world’s oldest Christmas pudding maker, founded in 1899. Now owned by Valeo Foods.

TR – Well that harks back to our discussion on Hidden Monopolies a few months ago.

TM – Yes it’s a classic hidden monopoly. During the production peak of May to November, they produce about 700k puddings a week.

TR – That is a lot of puddings.

TM – I know – I saw one report saying that in 2014 it took delivery of 1.4m litres of brandy, cider and sherry, which created this image in my head of oil tankers docking at ports delivering fountains of booze.

TR – That is amazing. So another key part of many Christmas meals is Turkey, and the turkey industry is having a pretty awful year.

TM – Ah yes – avian flu.

TR – Exactly. In the UK, avian flu precautions have led to the loss of about half the free range turkeys being reared for Christmas, so about 600k birds out of total flock of 1.2m. It’s been an absolute disaster for poultry farmers.

TM – Yes I really feel for them – that’s terrible – all their work just gone.

TR – Yes and it’s obviously going to make free range birds much harder for shoppers to find, so for most of us it’s going to have to be indoor-raised and frozen turkeys this year.

TM – It takes between 5 and 7 months to grow a Turkey to the right size, so there’s no way of recovering this year unfortunately.

TR – OK, let’s move onto trees. 5-7 months is a long time, but trees have a 5-7 year lead time and grow about a foot a year.

TM – so lots of plantation planning needed.

TR – exactly. Now when people in the UK think about Christmas trees, they often associate them with Prince Albert and Queen Victoria, but the first known UK tree actually belonged to Princess Charlotte who was Princess of Wales and George III’s only legitimate grandchild until Victoria was born.

TM – So I assume that was back at the turn of the 19th century?

TR – Yes. In 1800, but the tradition of bringing greenery indoors at winter goes back to Germany in the 16th century as well as the Egyptians and Romans. Let’s bring it back to today – there are a few states in the US that are prolific tree growers. Let’s talk about the West coast.

TM – I imagine the north western states like Washington and Oregon are ideal.

TR – Yes, so Oregon grows over 7m trees, and over 90% of them are exported. Bonus point if you can guess the state that buys the most from there.

TM – I’ll go for California – huge, rich, right next door and probably too warm for fast growing conifers?

TR – You are spot on,  Over 45% of Oregon’s trees go to California. And another place that is great for growing trees is Norway.

TM – As we can tell from the annual Trafalgar Square Christmas tree that the people of Norway have given the UK as thanks for our part in WW2, since 1947. A classic quiz Christmas quiz question!

TR – Well actually I’ve got a more left-field Christmas quiz question for you today – which country has a modern tradition of eating KFC for Christmas dinner?

TM – Errr – that is a good one – it feels a bit obvious to say the US or Canada, so I’ll go for somewhere with a bit of affection for US culture, maybe Australia?

TR – It’s actually Japan!

TM – What!

TR – So KFC launched their “Kentucky for Christmas” marketing campaign in 1974, and it was an instant hit and now KFC is a popular choice for Christmas dinners in Japan. 3.6m families according to the BBC.

TM – Amazing – that sounds like’s KFC’s equivalent of the de beers ‘Diamonds are forever’ campaign – an enormous success.

TR – Absolutely. So less than 1% of the Japanese population identify as Christian, which makes Christmas a secular holiday, but did you know that back in the UK, around the time of Oliver Cromwell, when puritans were gaining in power, the Christmas holiday was effectively banned for 12 years from 1647?

TM – That is pretty extreme – although our couple of Christmases have been pseudo-banned by COVID restrictions, so it’s a bit easier to imagine Cromwell’s England than it would have been in 2019.

TR – Dark times! Though putting up Christmas decorations is a dangerous job. 

TM – Aha! Are you talking about the thousands of people in the US who end up in A&E because of decorating mishaps every year?

TR – 15k people to be precise.  Be careful putting your LED reindeer on your roof, Tom!

TM – So, the next Christmas tradition that I’d like to touch on is how advent calendars have developed into marketing ploys.

TR – Go on…

TM – well you’ve probably noticed that one of the big trends in advent calendars over the last few years has been very expensive ones filled with beauty and cosmetic products. They generally advertise themselves as costing £75 or whatever, but containing supposedly hundreds of pounds worth of products.

TR – Ah yes I have seen those – often from the big department stores and beauty retailers.

TM – Yes exactly – they’re a clever way of marketing brands and getting people to try new things, while making them feel like they’re getting a bargain.

TR – I suppose the gross margins on those products are so high that a calendar can be sold at that £75 price point and still break even.

TM – Exactly, people are basically paying for the free samples counter to be posted to them. The marketing value is immense.  I came across this great quote from Emily Sissons, a Buyer at Liberty Beauty: “Aside from being the biggest launch of the year for us, our advent calendar is a fantastic way for our brands to get their product into our very loyal, very engaged customers’ hands. Since inception, we continually see incredible conversion and uplifts every year.”

TR – So Tom, it really is a great way to get people to try things. So, how many gifts would you receive if someone gave you all the gifts in the song the 12 days of Christmas? 

TM – That’s going to take a moment, so you’d get a dozen partridges in a pear tree, 22 turtle doves, 30 French hens… it adds up quickly.  So I’ll guess 3 or 4 hundred?

TR – Well, not bad. The answer is 364.  Though what you’d do with 12 lords a leaping is beyond me!

TM – Personally I’d abolish them.

TR – Ha! I think I’ll sidestep that and move on to some work that our colleague Tom Hosking found pointing to the economic value add of Christmas.

TM – Ok ok - so he found this in an old copy of the economist.  In it an economist called Waldfogel suggested that people value the gifts they receive at less than their cost.

TR – so overall receiving a gift typically results in a loss of a tenth to a third of that value… but in a heartwarming Christmas twist, some follow up work 5 years later looked at the act of giving and found that the signal it passes on makes the gift more valuable in the eyes of the recipient.

TM – So the gift itself is perceived as being worth less than the cost, but the act of giving more than makes up for it – the feel good factor is real!

TR – That’s a warm feeling to end this section on.  So let’s move onto news stories – what’s piqued your interest this episode Tom?

TM – Well I think we have to start with ChatGPT, the chatbot from OpenAI that is taking the internet by storm.

TR – OpenAI are the people behind DALL-E 2 the AI image generator we’ve spoken about previously.

TM – Yes the very same. So this time, we have an AI that we can talk to, that can generate very realistic responses to pretty much anything you can ask it. It does struggle a bit with facts – it’s not Wikipedia – but it’s excellent at creative tasks. I thought I’d test it by asking for a pitch for a Netflix Christmas movie.

TR – OK, very topical – so what did it come up with?

TM – Right – I’ll read its response verbatim, so you can judge for yourself:

Are you looking for a heartwarming Christmas tale that will bring the whole family together? Look no further than "A Very Merry Mix-Up"!

In "A Very Merry Mix-Up," we follow the story of Alice, a young woman who gets stranded in a small town on her way to visit her fiance's family for Christmas. When she arrives at their grand estate, she is mistaken for the family's long-lost daughter and swept into their holiday celebrations.

As Alice struggles to keep up the charade, she finds herself falling for the town's charming innkeeper and discovering the true meaning of family. But with her own family expecting her across the country, will Alice be able to find her way back home in time for Christmas?

Filled with laughter, love, and holiday cheer, "A Very Merry Mix-Up" is the perfect addition to your Netflix queue this Christmas season.

TR – That’s amazing.

TM – Pretty good eh? I know it’s not perfect – the plot doesn’t quite make sense – but neither do most of the actual Christmas films on Netflix.

TR – I would not have guessed that was from an AI

TM – Neither would I. And it can write letters, poems, scripts, news articles. Imagine something like this built into Microsoft Office – it’s going to change people’s view of AI.

TR – So on a related note, I came across a company in the US called DoNotPay, that has built a chat bot based on GPT.

TM – OK, what does it do?

TR – Well you can use their bot to contact your cable company like Comcast… and it will use all its tricks to persuade them to lower your subscription cost. At the moment their CEO is calling it a “mind blowing working prototype”, so it sounds like it’ll be out soon.

TM – So we’ll have bots battling with bots and assisted by other bots with real money at stake.

TR – Exactly.  So my next item is actually a double header from the Google AI team.  The first flows on nicely from the ChatGPT conversation and is a paper that was published in the journal Science.

TM – A reputable publication.

TR – Indeed, and it showed how Google had entered an AI in a coding competition and it successfully beat 54% of competitors.  AI is now a key part of programming, in this case directly.

TM – I think ChatGPT is being used as a sort of copilot by coders who ask it for help identifying bugs and generally making their code more efficient.

TR – I’ve also got a second story from Google’s quantum computing team, who made “a traversable wormhole” within a quantum computer. This has apparently been something that has been attempted for a few years and sounds particularly cool.  Either way, it’s a reflection that ground breaking research is being performed more and more by big companies not by governments –

TM – and that has implications for the returns from big research may end up at those large R&D companies rather than spread as widely as they were historically. So sticking with Google, the next thing I wanted to highlight was their annual review of search trends.

TR – Ah yes I’ve seen some coverage about this.

TM – So every year Google releases data about the top trending search terms, and the 2022 edition just came out. Now Google’s list often gets misreported – it’s not actually a list of the most searched for words and phrases each year – it’s a list of the words and phrases that had the biggest spike in interest compared to the previous year. The reason they don’t just publish the most popular search terms on an absolute basis is that they’d almost always just be the names of other websites that people are searching for, like Facebook and Youtube. Most people use Google as a sort of smart address bar.

TR – Makes sense, so what were the breakout stars this year?

TM – Well the #1 trending term globally was Wordle, which I think we can all agree really exploded in popularity this year, and ended up as a very shrewd acquisition by the New York Times.

TR – Yes they reportedly only paid about $10m or so I think.

TM – Indeed. Now interestingly, the Top 5 TV trending shows in the US were all Netflix or HBO – Euphoria, Stranger Things, The Watcher, Inventing Anna, House of the Dragon. Shows the cultural might of those companies.

TR – I particularly enjoyed looking at the top recipe searches – shows the global footprint of Google’s search with the top 5 including a Pakistani, a Brazilian, a Turkish, a Anglo-American and a German dish.

TM – That is cool.

TR – So let’s move onto TSMC and the mega investment in a new semiconductor chip manufacturing facility in Arizona.

TM – Yes, this is huge: TSMC is expanding its US manufacturing plans to include a 3nm plant, which is the current leading edge in chip manufacturing – of course it’ll take a few years to come onstream but it will be among the most sophisticated plants outside Taiwan and Korea.

TR – Yes, it’s a staggering cost. $40bn up from the initial $12bn as they’ve expanded the scope… and interesting that it will still rely on an always on connection to TSMC in Taiwan. But I thought the speech from Morris Chang was worth noting – Chang is the father of TSMC and the fabless manufacturing model that has transformed semiconductor design and the world.

TM - Go on…

TR – He pointed out that TSMC had tried to build a leading edge fab in the US in 1995 and his dream had turned into a nightmare of people, culture and cost overruns.

TM – This was the Wafertech project that they pulled out of several years later. But they’re back now in the US 25 years later but in Arizona?

TR – Yes – and with government support – federal, state and local and over a thousand engineers trained up in Taiwan in advance.  Should give them a good chance of success at the almost leading edge.

TM – Agreed – I also thought it was interesting that Chang declared that “Globalisation is almost dead”.

TR – That’s a major change in mindset for a very global company.

TM – The last thing from me today, and for this year, is a story marking the end of an era – The last Boeing 747 ever to be produced rolled off the production line in Everett, Washington state on December 6th, 55 years after production started in 1967.

TR – Now that is a good innings!

TM – Agreed. The final plane was number 1574. So 747s are now rarely used for passengers, as they’ve been supplanted by more modern and efficient models. In 1990 747s made up 28% of the world’s fleet of widebody passenger aircraft and 71% of freight aircraft – now they are just 2% and 21%.

TR – I think British Airways took their last ones out of service in 2020.

TM – Yes, but there are still two 747s left to deliver after this one, which will share the job of being Air Force One, to transport the President.

TR – In related news COMAC, the Chinese plane manufacturer finally delivered its first passenger plane to rival Boeing 737s and Airbus A320s – the C919.

TM – This has been a bit delayed hasn’t it?

TR – Yes, 14 years of planning and delays, but impressive to get their first proper passenger plane delivered to China Eastern, and quite a lot of symbolism with the 747 timing.

TR – Thank you for listening to Global infusions - a podcast that believes that the best discussions are had over tea and cake. We hope you've enjoyed your cuppa and our thoughts on Christmas. Please do subscribe through Apple or Spotify and with that we wish you goodbye!

TM – Goodbye!

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